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Stock Market News for Aug 4, 2022

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Wall Street closed sharply higher on Wednesday on the back of robust economic data and strong earnings numbers. Investors shook off fears over any further strain in U.S.-China relations over Nancy Pelosi’s visit to Taiwan. All the three major stock indexes ended in the green.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) rose 1.3% or 416.33 points to close at 32,812.5. Twenty-five components of the 30-stock index ended in green, while four ended in red and one remained unchanged.

The tech-heavy Nasdaq Composite finished at 12,668.16, gaining 2.6% or 319.40 points led by a rally in the large-cap tech stocks.

The S&P 500 added 1.6% or 63.98 points to end at 4,155.17. Ten of the 11 broad sectors of the index closed in the green. The Technology Select Sector SPDR (XLK), the Consumer Discretionary Select Sector SPDR (XLY) and the Communication Services Select Sector SPDR (XLC) gained 2.7%, 2.4% and 2.4%, respectively, while the Energy Select Sector SPDR (XLE) dropped 2.9%.

The fear-gauge CBOE Volatility Index (VIX) was down 8.3% to 21.95. A total of 11.7 billion shares were traded Wednesday, higher than the last 20-session average of 10.7 billion. Advancers outnumbered decliners on the NYSE by a 2.30-to-1 ratio. On Nasdaq, a 2.59-to-1 ratio favored advancing issues.

Impact of Speaker Pelosi’s Visit to Taiwan Subsides

Wall Street recovered from the effects of Nancy Pelosi’s visit to Taiwan as it became clear that there were no immediate ramifications that would further strain the relationship between the United States and China.

Pelosi, Speaker of the U.S. House of Representatives, made an unannounced visit to Taiwan on Tuesday, disregarding warnings from China. China responded by announcing war games to be played on the Taiwan Strait and a defensive show of air power intended to intimidate Taiwan, expressing its displeasure. Markets fell on Tuesday in the apprehension of a military conflict and strained trade relations but rebounded the day after as the immediate fallout was factored in.

Markets Gain Big on Increased Profit Outlook From PayPal and CVS

PayPal Holdings, Inc. (PYPL - Free Report) reported earnings of $0.93 per share in second-quarter 2022, beating the Zacks Consensus Estimate by 9.4%. Net revenues of $6.81 billion exhibited year-over-year growth of  9% and surpassed the Zacks Consensus Estimate of $6.76 billion. The company raised its adjusted profit expectations to between $3.87 and $3.97 per share for the year from its previous forecast of $3.81 and $3.93.

CVS Health Corporation (CVS - Free Report) reported second-quarter 2022 adjusted earnings per share of $2.40, surpassing the Zacks Consensus Estimate by 11.1%. Total revenues in the second quarter rose 11% year-over-year to $80.64 billion, beating the Zacks Consensus Estimate of $76.68 billion. The company currently expects adjusted EPS in the band of $8.40-$8.60, up from the earlier projected $8.20-$8.40.

PYPL and CVS shares rose 9.3% and 6.3%, respectively, based on the rosy picture they painted for the year, and had a broader impact on tech stocks and the pharmacy services sector.

Nasdaq was the day’s biggest gainer as it closed the session at a three-month high. Consequently, shares of Apple, Inc. (AAPL - Free Report) and Amazon.com, Inc. (AMZN - Free Report) gained 3.8% and 4%, respectively. Both carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Economic Data

Commercial crude oil inventories in the United States increased by 4.5 million barrels from the previous week. At 426.6 million barrels, U.S. crude oil inventories are about 7% below the five-year average for this time of the year.

The U.S. Census Bureau reported that new Factory Orders for June increased $10.8 billion or 2% compared with the consensus estimate of 0.7%, to $555.2 billion. Orders had increased 1.8% in May.

The Institute for Supply Management (ISM) reported that Services PMI for July came in at 56.7, against a consensus of 54, and significantly higher than the June index of 55.3.